DESCRIPTION: Micro and small enterprises (MSEs) are an important source of employment and contributor to GDP (Gross Domestic Product) in developing countries in southern Africa, but illness and poor health are major threats to economic development. This project will break new ground by investigating the relationship between health status of owners or managers and the economic performance of MSEs in South Africa. It will deal with illnesses in general and with AIDS in particular, and will explore the direct effect on both employment and revenue growth and the indirect effect on the cost of credit. Based on a novel theory of production behavior, it will test the hypothesis that a reduction in health for key owners or managers will often adversely affect the well being of other employees and consumers in the community. Such effects occur in connection with businesses engaged in team production of time-sensitive goods and services where replacement of the key person is difficult. Through a two-wave household survey in three provinces of South Africa with high HIV prevalence, the project will collect unique data by combining information on MSE starts, growth rates, and exits with measures of owner or manager health level and change. Data analysis will (1) determine the overall impact of poor owner or manager health (and AIDS) on MSEs, (2) measure the impact of community-level variations in owner or manager health (and AIDS) on the availability of financing for MSEs, and (3) estimate the differences in impacts by characteristics of the owner (e.g., age, race, and gender), of the business (e.g., size or type of business), and of the location (e.g., urban vs. rural). Data will be analyzed with a two-part model, one part examining MSE economic activity given survival, and the other analyzing the probability of MSE survival. The results will show whether the economic benefits from some MSEs are especially vulnerable to health threats. They will be useful for predicting the effect of changes in health on economic activity in this sector, and for allocating resources for disease prevention and treatment.